U.S. markets dip in choppy trade after Fed memo
NEW YORK • Wall Street struggled for direction on Wednesday after the Federal Reserve released meeting minutes showing broad agreement on the need to raise borrowing costs further despite sharp criticism from U.S. President Donald Trump over interest rate hikes.
Every policy-maker backed the Fed’s September rate increase, according to the minutes of the Sept. 25-26 meeting, published Wednesday. The display of unanimity could bolster expectations the central bank will raise rates a fourth time this year in December.
Participants in the FOMC rate-setting committee “generally anticipated that further gradual increases” in short-term borrowing costs would be consistent with the kind of continued economic expansion, labour market strength, and firm inflation that most anticipated, the minutes showed.
“This gradual approach would balance the risk of tightening monetary policy too quickly, which could lead to an abrupt slowing in the economy and inflation moving below the Committee’s objective, against the risk of moving too slowly, which could engender inflation persistently above the objective and possibly contribute to a buildup of financial imbalances,” the minutes said.
Trump has accused the Fed of endangering the country’s economic health, this week saying the central bank is his “biggest threat” and last week calling the central bank “crazy,” “loco,” “ridiculous” and “too cute.”
Though the minutes did not refer to any of Trump’s criticism, its message of further rate increases suggests that policy-makers are not fazed by it.
The S&P 500 zigzagged between positive and negative territory after the minutes were published.
“This is consistent with the Fed’s rhetoric that they will continue to gradually raise interest rates. A lot has to happen for the Fed not to move again in December,” said Ryan Sweet, head of monetary policy research at Moody’s Analytics in West Chester, Pa.
“There will be no more hand-holding with the Fed.”
Jim Paulsen, chief investment strategist at the Leuthold Group in Minneapolis, said some traders used the minutes as a reason to change direction.
“Whatever way you lean, you could find something in here to bolster your case,” Paulsen said. “This has more to do with technical trading. We were (near) the highs of the day when it hit.”
Wednesday afternoon, the Dow Jones Industrial Average fell 60.83 points, or 0.24 per cent, to 25,737.59, the S&P 500 lost 0.14 points, or 0.00 per cent, to 2,809.78 and the Nasdaq Composite dropped 4.97 points, or 0.06 per cent, to 7,640.52.
By Wednesday, U.S. equities had only partially recovered ground lost in a massive sell-off the week before when it marked its biggest losses since March.
Before the minutes, trading had already been choppy, and the S&P 500 struggled to build on the previous day’s rally after disappointing housing data dragged down stocks such as Home Depot
Inc. and home builders. Of the S&P’s 11 major sectors, financials was the biggest gainer, up 0.96 per cent. Materials was the biggest loser, down 0.9 per cent.
Home Depot shares were down around four per cent while the PHLX Housing index was down 1.8 per cent.
Among the brighter spots was Netflix Inc., which rose 4.3 per cent, after reporting blowout subscriber addition numbers. United Airlines Inc.
shares climbed six per cent after a solid third-quarter profit and again raising its 2018 outlook. That also lifted other airline stocks.
Declining issues outnumbered advancing ones on the NYSE by a 1.69-to-1 ratio.